CHAPTER 120
HOUSE BILL No. 2343
An Act concerning accountants; relating to the board of accountancy; relating to peer review
and permits; amending K.S.A. 2000 Supp. 1-202, 1-302b, 1-310, 1-311, 1-312, 1-321
and 1-501 and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 2000 Supp. 1-302b is hereby amended to read as
follows: 1-302b. (a) No applicant who holds a Kansas certificate issued by
the board shall receive a permit to practice in this state as a certified
public accountant until the applicant submits evidence satisfactory to the
board of having completed one year of accounting experience. This ex-
perience shall include providing any type of service or advice involving
the use of attest or nonattest skills all of which was verified by a certified
public accountant holding an active license to practice, meeting require-
ments prescribed by the board by rule. This experience would be ac-
ceptable if it was gained through employment in government, industry,
academia or public practice.

      (b) Any individual permit holder who is responsible for supervising
attest or compilation services and signs or authorizes someone to sign the
accountant's report on any audit, review, compilation or the examination
of prospective financial information on behalf of the firm, shall meet the
experience or competency requirements, as adopted by the board
through rules and regulations.

      (c) Any individual permit holder who signs or authorizes someone to
sign the accountant's report on any audit, review, compilation or the ex-
amination of prospective financial information on behalf of the firm, shall
meet the experience or competency requirement of subsection (b).

      (d) As an alternative to the requirements of subsection (a), an indi-
vidual with an active license issued by another state who establishes such
individual's principal place of business in this state shall request the is-
suance of both a certificate and a permit to practice from the board prior
to establishing such principal place of business. The board may issue both
a certificate and permit to such individual who obtains from the NASBA
national qualification appraisal service verification that such individual's
C.P.A. qualifications are substantially equivalent to the C.P.A. licensure
requirements of the uniform accountancy act. An application under this
section may be made through the NASBA qualifications appraisal service
or similar organization approved by the board. Any individual meeting
the requirements set forth in this subsection who is denied a certificate
and a permit to practice shall have the opportunity to be heard pursuant
to the Kansas administrative procedures act.

      Sec.  2. K.S.A. 2000 Supp. 1-310 is hereby amended to read as fol-
lows: 1-310. (a) Permits to engage in the practice of certified public ac-
countancy in this state shall be issued by the board to persons who have
met the requirements under K.S.A. 1-302b, and amendments thereto.

      (b) Each holder of a Kansas certificate, which is numbered with an
odd number, who is qualified under K.S.A. 1-302b, and amendments
thereto, shall have a permit to practice issued or renewed on a biennial
basis which shall expire on the next July 1 which occurs after the date the
permit was issued or renewed and which occurs in an odd-numbered
year.

      (c) Each holder of a Kansas certificate, which is numbered with an
even number, who is qualified under K.S.A. 1-302b, and amendments
thereto, shall have a permit to practice issued or renewed on a biennial
basis which shall expire on the next July 1 which occurs after the date the
permit was issued or renewed and which occurs in an even-numbered
year.

      (d) A person may renew a permit within 12 months of its expiration
date if such person submits a complete and sufficient renewal application
together with the fee prescribed by K.S.A. 1-301, and amendments
thereto.

      (e) As a condition for renewal of a permit to practice, the board shall
require all permit holders to furnish with such applicant's renewal appli-
cation, evidence of participation in a peer review program unless waived
pursuant to K.S.A. 1-501, and amendments thereto, and participation in
continuing education in accounting, auditing, or related areas of at least
80 hours during the two-year period for renewal unless the board waives
all or a portion of the continuing education requirements. The board may
adopt rules and regulations regarding peer review and continuing edu-
cation including the number of continuing education hours required for
each year of the two-year period and the type of continuing education.
As a condition for renewal of a permit to practice, the board shall require
permit holders who do not have their principal place of business in Kansas
and who are not required to register pursuant to K.S.A. 1-308, and
amendments thereto, to furnish with such applicant's renewal application
evidence of participation in a peer review program unless waived for good
cause as determined by the board.

      (f) The board may exempt from the continuing education require-
ments an individual who holds a permit from another state if:

      (1) The permit holder has a principal place of business located out-
side the state of Kansas;

      (2) the permit holder verifies to the board's satisfaction that such
person has met the continuing education requirements of the state in
which the principal place of business is located;

      (3) the board considers the continuing education requirements of the
state in which the principal place of business is located to be substantially
equivalent to those of Kansas; and

      (4) the state in which the principal place of business is located extends
the same exemption to Kansas permit holders who practice in that state.

      (g)  A person who fails to renew a permit within 12 months after its
expiration may apply for reinstatement by making application on a form
provided by the board, submitting a reinstatement fee as prescribed by
K.S.A. 1-301 and amendments thereto, and submitting proof that such
person has obtained 40 hours of qualifying continuing education within
the preceding 12 months prior to applying for reinstatement.

      Sec.  3. K.S.A. 2000 Supp. 1-311 is hereby amended to read as fol-
lows: 1-311. (a) The board may deny an application for a Kansas certifi-
cate, revoke or suspend any certificate issued under the laws of this state
including a Kansas certificate, or any registration granted under K.S.A.
1-308, and amendments thereto, or may revoke, suspend or refuse to
renew any permit issued under K.S.A. 1-310 and amendments thereto,
and any notification issued pursuant to K.S.A. 2000 Supp. 1-322 and
amendments thereto, may censure the holder of any such permit, certif-
icate, or notification or registration, limit the scope of practice of any
permit holder, and may impose an administrative fine not exceeding
$2,000, for any one or any combination of the following causes:

      (1) Fraud or deceit in obtaining a certificate, permit, firm registration
or notification;

      (2) cancellation, revocation, suspension or refusal to renew a person's
authority to practice for disciplinary reasons in any other jurisdiction for
any cause;

      (3) failure, on the part of a holder of a permit to practice or notifi-
cation and a registered firm to maintain compliance with the require-
ments for issuance or renewal of such permit, or notification or registra-
tion;

      (4) revocation or suspension of the right to practice before any state
or federal agency;

      (5) dishonesty, fraud or gross negligence in the practice of certified
public accountancy or in the filing or failure to file the certificate holder's
own income tax returns;

      (6) violation of any provision of this act or rule and regulation of the
board except for a violation of a rule of professional conduct;

      (7) willful violation of a rule of professional conduct;

      (8) violation of any order of the board;

      (9) conviction of any felony, or of any crime an element of which is
dishonesty or fraud, under the laws of the United States, of Kansas or of
any other state, if the acts involved would have constituted a crime under
the laws of Kansas;

      (10) performance of any fraudulent act while holding a Kansas cer-
tificate;

      (11) making any false or misleading statement or verification, in sup-
port of an application for a certificate, permit, notification or firm regis-
tration filed by another; or

      (12) failure to establish timely compliance with peer review pursuant
to K.S.A. 1-501, and amendments thereto; and

      (12) (13) any conduct reflecting adversely on a permit holder's fitness
to practice certified public accountancy.

      (b) In lieu of or in addition to any remedy specifically provided in
subsection (a), the board may require of a permit holder satisfactory com-
pletion of such continuing education programs as the board may specify.

      (c) All administrative proceedings pursuant to this section shall be
conducted in accordance with the provisions of the Kansas administrative
procedure act and the act for judicial review and civil enforcement of
agency actions.

      Sec.  4. K.S.A. 2000 Supp. 1-312 is hereby amended to read as fol-
lows: 1-312. After notice and hearing as provided by the Kansas admin-
istrative procedure act: (a) The board shall revoke or suspend the regis-
tration of any registered firm if at any time it does not have all the
qualifications prescribed by K.S.A. 1-308, and amendments thereto; (b)
the board may revoke or suspend the registration of any registered firm
or may revoke, suspend or refuse to renew the permit to practice of any
member of a registered firm, or may censure the holder of any such
permit for any of the causes enumerated in K.S.A. 1-311, and amend-
ments thereto; (c) the board may revoke or suspend the registration of
any registered firm upon the cancellation, revocation, suspension or re-
fusal to renew the authority of the firm or any partner, officer, shareholder
or member thereof to practice public accounting in any other state; and
(d) the board may revoke or suspend the registration of a registered part-
nership if any corporate member thereof ceases to be a professional cor-
poration in good standing under the professional corporation law of Kan-
sas or if the board has revoked or suspended the permit to practice of
any shareholder of such professional corporation. (a) Except as provided
in subsection (b), the board may deny an application to register a firm,
revoke or suspend a firm's registration, censure a firm, limit the scope of
practice of a firm or impose such remedial action as it deems necessary
to protect the public interest, or both, and impose an administrative fine
not exceeding $2,000 for any one or any combination of the following
causes:

      (1) Failure to meet the requirements of K.S.A. 1-308 and amendments
thereto;

      (2) fraud or deceit in obtaining a registration;

      (3) revocation or suspension of a firm's right to practice before any
state or federal agency;

      (4) dishonesty, fraud or gross negligence in the practice of certified
public accountancy;

      (5) violation of any provision of chapter 1 of the Kansas Statutes An-
notated and rules and regulations promulgated by the board except for a
violation of a rule of professional conduct;

      (6) willful violation of a rule of professional conduct;

      (7) violation of any order of the board;

      (8) cancellation, revocation, suspension or refusal to renew the au-
thority of a firm to practice certified public accountancy in any other
state;

      (9) conviction of a firm of any felony, or of any crime an element of
which is dishonesty or fraud, under the laws of the United States, of
Kansas or of any other state, if the acts involved would have constituted
a crime under the laws of Kansas; or

      (10) failure to establish timely compliance with peer review pursuant
to K.S.A. 1-501 and amendments thereto;

      (b) In actions arising under peer review for reports modified for mat-
ters relating to attest services, the board may take such remedial action
as it deems necessary to protect the public interest. However, the board
may not limit the scope of practice of attest services of a firm or limit the
scope of practice of attest services of any permit holder under K.S.A. 1-
311, and amendments thereto, for failure to comply with generally ac-
cepted accounting principles, generally accepted auditing standards and
other similarly recognized authoritative technical standards unless:

      (1) The firm has received at least two modified peer review reports
during 12 consecutive years relating to attest services and the board finds
that the firm has exhibited a course of conduct that reflects a pattern of
noncompliance with applicable professional standards and practices; or

      (2) the firm has failed to abide by remedial measures required by a
peer review committee or the board.

      (c) Nothing in subsection (b) shall be construed to preclude the board
from: Limiting the scope of practice of attest services of a firm or limiting
the scope of practice of attest services of a permit holder under K.S.A. 1-
311, and amendments thereto; or taking such remedial action as the board
deems necessary to protect the public interest, after a review of an adverse
peer review report based on matters relating to attest services if the board
determines that the firm failed to comply with generally accepted ac-
counting principles, generally accepted auditing standards and other sim-
ilarly recognized authoritative technical standards.

      (d) All administrative proceedings pursuant to this section shall be
conducted in accordance with the provisions of the Kansas administrative
procedure act and the act for judicial review and civil enforcement of
agency actions.

      (e) The board shall not have the power to assess fines under this sec-
tion if a fine has been assessed for the same or similar violation under the
provisions of subsection (a) of K.S.A. 1-311 and amendments thereto.

      Sec.  5. K.S.A. 2000 Supp. 1-321 is hereby amended to read as fol-
lows: 1-321. When used in this act, the following terms have the meanings
indicated:

      (a) ``Actively participate'' means participation that is continuous as
one's primary occupation.

      (b) ``Affiliated entity'' means one that provides services to the CPA
firm or provides services to the public that are complementary to those
provided by the CPA firm.

      (c) ``AICPA'' means the American institute of certified public ac-
countants.

      (d) ``Attest'' means providing the following financial statement serv-
ices:

      (1) Any audit or other engagement to be performed in accordance
with the statements on auditing standards (SAS);

      (2) any audit to be performed in accordance with the Kansas munic-
ipal audit guide;

      (3) any review of a financial statement or compilation of a financial
statement to be performed in accordance with the statements on stan-
dards for accounting and review services (SSARS); and

      (4) any examination of prospective financial information engagement,
except a compilation, to be performed in accordance with the statements
on standards for attestation engagements (SSAE); and.

      (5) the statements on standards and guide specified in this act shall
be adopted by reference by the board pursuant to rulemaking and shall
be those developed for general application by the AICPA or the Kansas
division of accounts and reports.

      (e) ``Board'' means the Kansas board of accountancy established un-
der K.S.A. 1-201 and amendments thereto.

      (f) ``Certificate'' means a certificate as a certified public accountant
issued under K.S.A. 1-302 and amendments thereto, or a certificate as a
certified public accountant issued after examination under the law of any
other state.

      (g) ``Client'' means a person or entity that agrees with a permit holder
to receive any professional service.

      (h) ``Compilation'' means providing a service to be performed in ac-
cordance with the statements on standards for accounting and review
services (SSARS) or performed in accordance with the statements on stan-
dards for attestation engagements (SSAE) that is presented in the form of
financial statements or information that is the representation of manage-
ment, or both, without undertaking to express any assurance on the state-
ments.

      (h) (i) ``Equity capital'' means (1) capital stock, capital accounts, cap-
ital contributions or undistributed earnings of a registered firm as referred
to in K.S.A. 1-308 and amendments thereto; and (2) loans and advances
to a registered firm made or held by its owners. ``Equity capital'' does not
include an interest in bonuses, profit sharing plans, defined benefit plans
or loans to a registered firm from banks, financial institutions or other
third parties that do not actively participate in such registered firm.

      (i) (j) ``Good moral character'' means lack of a history of professional
dishonesty or other felonious acts.

      (j) (k) ``Active license'' means a certificate or a permit to practice
issued by another state that is currently in force and authorizes the holder
to practice certified public accountancy.

      (k) (l) ``Licensee'' means the holder of a certificate or a permit to
practice issued by this state or another state.

      (l) (m) ``Manager'' means a manager of a limited liability company.

      (m) (n) ``Member'' means a member of a limited liability company.

      (n) (o) ``NASBA'' means the national association of state boards of
accountancy.

      (o) (p) ``Nonattest'' means providing the following services:

      (1) The preparation of tax returns and providing advice on tax mat-
ters;

      (2) the preparation of any compilation;

      (2) (3) management advisory, consulting, litigation support and as-
surance services, except for attest services;

      (3) (4) financial planning; and

      (4) (5) any other financial service not included in the statements on
auditing standards, the statements on standards for accounting and review
services, the standards for attestation engagements as developed by the
American institute of certified public accountants or as defined by the
board.

      (p) (q) ``Practice of certified public accountancy'' means performing
or offering to perform attest or nonattest services for the public while
using the designation ``certified public accountant'' or ``C.P.A.'' in con-
junction with such services.

      (q) (r) ``Practice of public accountancy'' means performing or offering
to perform attest or nonattest services for the public by a person not
required to have a permit to practice or a firm not required to register
with the board.

      (r) (s) ``Professional'' means arising out of or related to the specialized
knowledge or skills associated with CPAs.

      (s) (t) ``Report,'' when used with reference to financial statements,
means an opinion, report or other form of language that states or implies
assurance as the reliability of any financial statements and that also in-
cludes or is accompanied by any statement or implication that the person
or firm issuing it has special knowledge or competence in accounting or
auditing. Such a statement or implication of special knowledge or com-
petence may arise from use, by the issuer of the report, of names or titles
indicating that the person or firm is an accountant or auditor or from the
language of the report itself. The term report includes any form of lan-
guage which disclaims an opinion when such form of language is conven-
tionally understood to imply any positive assurance as to the reliability of
the financial statements referred to or special competence on the part of
the person or firm issuing such language; and it includes any other form
of language that is conventionally understood to imply such assurance or
such special knowledge or competence.

      (t) (u) ``Rule'' means any rule or regulation adopted by the board.

      (u) (v) ``State'' means any state of the United States, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands and Guam; except that
``this state'' means the state of Kansas.

      (v) (w) ``Substantial equivalency'' is a determination by the board of
accountancy or its designee that the education, examination and experi-
ence requirements contained in the statutes and administrative rules of
another jurisdiction are comparable to, or exceed the education, exami-
nation and experience requirements contained in the uniform account-
ancy act or that an individual CPA's education, examination and experi-
ence qualifications are comparable to or exceed the education,
examination and experience requirements contained in the uniform ac-
countancy act.

      (w) (x) ``Uniform accountancy act'' means model legislation issued by
the AICPA and NASBA in existence on July 1, 2000. The board shall
adopt the act by reference pursuant to rulemaking. The board shall adopt
the version of the act in existence on July 1, 2000.

      Sec.  6. K.S.A. 2000 Supp. 1-501 is hereby amended to read as fol-
lows: 1-501. Commencing with permits firm registrations scheduled for
renewal for the fiscal year beginning on July 1, 1994 on December 31,
2001, and thereafter:

      (a) The board of accountancy may require as a condition for renewal
of a permit to practice firm registration that an applicant or the applicant's
firm a firm that provides attest services undergo a quality review or peer
review and submit evidence of such so that the board may determine the
degree of the applicant's firm's compliance with generally accepted ac-
counting principles, generally accepted auditing standards and other sim-
ilarly recognized authoritative technical standards. The reviews shall oc-
cur at least once every three years with the cost of such review to be
borne by the applicant or the applicant's firm.

      (b) The applicant's or applicant's firms' completion of a quality review
or peer review program endorsed or supported by the American institute
of certified public accountants or other substantially similar programs
shall satisfy the requirements of this section. The board shall provide for
oversight of these programs by adoption of rules and regulations.

      (c) The board may establish criteria for determining when the results
of a review under this section are satisfactory to the board. As a result of
the review the board may suspend or revoke a permit to practice or firm
registration when the results of the review under this section are unsat-
isfactory to the board. The board may renew a permit or firm registration
when the results of the review under this section are unsatisfactory to the
board if the applicant or applicant's firm agrees to follow a particular
education or remedial program prescribed by the board.

      (d) Failure of an applicant or the applicant's firm to undergo a review
under this section constitutes grounds for revocation or suspension by the
board of a permit to practice or certificate as prescribed by K.S.A. 1-311,
and amendments thereto, or to revoke or suspend a firm registration as
prescribed by K.S.A. 1-312, and amendments thereto, unless the board
determines that failure to have been due to a reasonable cause.

      (e) An applicant (c) A firm at the time of application, may request
in writing upon forms provided by the board, a waiver from the review
requirement. The board may grant a waiver if one or more of the follow-
ing conditions are met: the firm does not perform or has not performed
any attest services during the twelve-month period preceding the date of
application or for good cause as determined by the board.

      (1) The applicant and the applicant's firm do not engage in and do
not intend to engage in during the following year, financial reporting areas
of practice, including but not limited to, financial audits, reviews and
compilations;

      (2) for reasons of health;

      (3) due to military service;

      (4) in instances of hardship; or

      (5) for other good cause as determined by the board.

      An applicant A firm granted a waiver pursuant to subsection (1) on the
basis that the firm does not perform or intend to perform attest services
shall immediately notify the board if the applicant or the applicant's firm
engages in such practice and thus becomes subject to the review.

      (f) (d) Except as provided by K.S.A. 60-437, and amendments
thereto, and in actions by the board of accountancy to enforce this section
subsections (e) and (f) of this section, any reports, statements, memo-
randa, transcripts, findings, records, or working papers prepared and any
opinions formulated, in connection with any quality review or peer review
shall be privileged and shall not be subject to discovery, subpoena or other
means of legal compulsion for their release to any person or entity or be
admissible in evidence in any judicial or administrative proceeding, except
that such privilege shall not exist when the material in question is involved
in a dispute between a reviewer and the person or entity firm being
reviewed.

      (e) Nothing in subsection (d) shall limit the authority of the board to
require a person whose work is the subject of a peer review or a firm to
provide a copy of an adverse or modified peer review report and any
documents that contain comments from peer reviewers, responses to com-
ments from the person or firm and any document identifying follow-up
requirements for the purpose of determining the person's or firm's com-
pliance with generally accepted accounting principles, generally accepted
auditing standards and other similarly recognized authoritative technical
standards, provided however, the board may not request or require a
person or firm subject to a peer review to provide a peer review report
or any other document contained in this section unless the peer review
report has been accepted by a report acceptance committee under the
peer review program after December 31, 2001.

      (f) In any proceeding before the board in which discussion or admis-
sion into evidence of peer review report documents identified in subsection
(e) is proposed, the board or presiding officer shall conduct that portion
of the proceeding in closed session. In closing a portion of such proceeding,
the board or presiding officer may exclude any person from the proceed-
ing except the person whose work is the subject of peer review, members
of the permit holder's firm, the attorneys representing the parties, the
board's attorneys, necessary witnesses and a court reporter. The board or
presiding officer shall make the portions of the agency record in which
such documents are disclosed subject to a protective order prohibiting
further disclosure. Documents that are privileged under subsection (d)
and that are considered during a closed proceeding shall not be subject
to discovery, subpoena or other means of legal compulsion for their release
to any person or entity. No person in attendance at a closed portion of
such proceeding shall at a subsequent civil, criminal or administrative
hearing, be required to testify regarding the existence or content of a
document privileged under subsection (d) which was disclosed in a closed
portion of a proceeding, nor shall such testimony be admitted into evi-
dence in any subsequent civil, criminal or administrative hearing. All
other evidence shall be presented as part of the proceeding in an open
meeting. Offering any testimony or records in the open portion of a pro-
ceeding shall not be deemed a waiver of the peer review privilege created
in subsection (d).

      (g) No person who participates in the conduct of any peer review
within the scope of this section shall be liable in damages to any person
for any action taken or recommendation made in connection with the peer
review process.

      Sec.  7. K.S.A. 2000 Supp. 1-202 is hereby amended to read as fol-
lows: 1-202. (a) Each year the board shall meet and organize by electing
a chairperson and a vice-chairperson from its membership. The board
shall appoint a secretary, who need not be a member of the board. The
board shall meet at the call of the chairperson but not less than twice
each year and shall have a seal. The chairperson and the secretary of the
board shall have the power to administer oaths.

      (b) The board shall keep records of all proceedings and actions by
and before it. In any proceedings in court, civil or criminal, arising out of
or founded upon any provisions of this act, copies of such records which
are certified as correct by the secretary of the board under the seal of the
board shall be admissible in evidence and shall be prima facie evidence
of the correctness of the contents thereof.

      (c) The board may:

      (1) provide for certification, notification and registration and issue per-
mits to practice in accordance with the provisions of this act;

      (2) adopt, amend and revoke rules and regulations governing its ad-
ministration and enforcement of this act, including but not limited to: (A)
Educational qualifications required under K.S.A. 1-302a and amend-
ments thereto; (B) experience qualifications required under K.S.A. 1-
302b and amendments thereto; (C) continuing professional education
qualifications required under K.S.A. 1-310 and amendments thereto; (D)
professional conduct directed to controlling the quality of services by
licensees, and dealing among other things with independence, integrity
and objectivity, competence and technical standards, responsibilities to
the public and clients, commissions and referral fees, contingent fees,
advertising, firm names, discreditable acts and communication with the
board; (E) professional standards applicable to licensees; (F) the manner
and circumstances of use of the titles ``certified public accountant'' and
``C.P.A.''; (G) peer reviews required in K.S.A. 1-501 and amendments
thereto; (H) the definition of substantial equivalency for purposes of
K.S.A. 2000 Supp. 1-322 and amendments thereto; and (I) such other
rules and regulations as the board may deem necessary to regulate the
practice of certified public accountancy.

      (d) The board shall:

      (1) Keep accounts of its receipts and disbursements;

      (2) keep a register of Kansas certificates issued by the board;

      (3) deny, revoke, suspend and reinstate certificates, notifications, firm
registrations and permits; and

      (4) initiate proceedings, hold hearings and do all things necessary to
regulate the practice of certified public accountancy.

      (e) Any statements on standards and guides imposed by the board
shall meet the standards or guides developed for general application either
by the American institute of certified public accountants or the division
of accounts and reports which are in effect on July 1, 2001, or any later
version as adopted by the board in rules and regulations.

      (e) (f) A majority of the board shall constitute a quorum for the trans-
action of any business at any meeting of the board.

 Sec.  8. K.S.A. 2000 Supp. 1-202, 1-302b, 1-310, 1-311, 1-312, 1-321
and 1-501 are hereby repealed.
 Sec.  9. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 18, 2001.
__________